Al-Hadharah Boustead REIT BUY

Al-Hadharah Boustead REIT BUY
Price target RM1.80

Share price at 7 May RM1.40


Investment summary
Q108 results were above expectations, re-affirming our BUY rating. We continue to prefer Al-Hadharah REIT to traditional plantation companies due to: (1) superior capital management, given its 90% dividend payout vs. peers’ average of 50-60%; (2) lower dividend tax for REITs, with the potential for future tax incentives from the Sep08 Budget. We are neutral on the plantation sector, and advocate switching from IOI/KLK to small/mid-cap planters such as Al-Hadharah, which offer better value/yield. Given the tight global supply of edible oil and grain, we expect CPO price to stay firm in the next 6 months.



Laggard to CPO

Al-Hadharah’s share price has been flat-line since Nov07 despite CPO prices rising +14%. We think this is unfair, as Al-Hadharah is more of a CPO derivative than a true REIT, thanks to its profit-share arrangement on CPO price upside.